EV maker Nio gets regulatory nod for third factory in China, sources say

Baic Motor

05/06/2024 06:22

SHANGHAI, June 5 (Reuters) - Electric vehicle maker Nio
has won approval to build a third factory in China that would
boost its total approved production capacity to 1 million cars,
almost at par with Tesla's massive Shanghai plant, three people
with knowledge of the matter said.
    Tesla  TSLA.O  can push out 1.1 million vehicles per year
from its Shanghai plant, its biggest manufacturing hub globally.
    The latest approval for a plant with a 600,000 unit annual
capacity is a major win for Nio  9866.HK , given China's state
planner has been cautious about waving through new EV production
plans since 2022 amid overcapacity worries and slowing demand.
Nio received an auto manufacturing licence late last year.
    Nio, the eighth biggest EV maker in China by sales, has
started construction of the third plant - known as F3 - but it
is not immediately clear when mass production from the site
would begin, the sources said on condition of anonymity as the
matter is not yet public.
    The F3 plant is located in Huainan city in eastern province
Anhui and will primarily produce vehicles for Nio's newly
launched affordable car brand, Onvo, the people added.
    Nio told Reuters that construction of the third plant had
started and that it would have a capacity of 100,000 units on a
one-shift basis. The expansion plan is aimed at meeting growing
demand for Nio- and Onvo-branded cars and to produce newly
launched vehicles, the EV maker said in a statement.
    "The capacity of our existing plants won't be enough to meet
market demand. There is no overcapacity with Nio," it added. 
    Nio did not respond when asked whether the capacity of the
F3 plant would be later expanded to 600,000 units.
    China's Ministry of Industry and Information Technology, and
the National Development and Reform Commission did not respond
to requests for comments.    
    Nio launched the Onvo brand in May, when it also unveiled
the Onvo L60 SUV with a sticker price starting at 219,900 yuan 
($30,300), while Tesla's Model Y starts at 249,900 yuan in
China. 
    Nio, like many of its peers, is looking to broaden its
customer base and boost sales with cheaper models amid a
bruising price competition in China that has forced it to trim
workforce and defer long-term projects that would not contribute
to financial performance within three years.
    
    WHAT OVERCAPACITY?
    The move by regulators to approve new EV capacity comes amid
global concerns about overcapacity in China's EV industry, which
critics says stems from state-led subsidies.
    Chinese officials too have in the past issued overcapacity
warnings, but in April this year Beijing said that assertions of
excess capacity were groundless and that China's EV production
system was simply more competitive.
    Nio's founder and CEO, William Li, has also defended the EV
industry, arguing the overcapacity issue is with foreign brands
that have seen their market share drop to 40% from 60% in China
over the past few years largely due to their uncompetitive
products and services.
    "Attacks on China's industry with overcapacity is out of
politics. Let's do the maths!" Li told reporters in May, adding
that foreign brands would have more than 5 million units of
idled annual capacity in China due to their market share loss.
    Factory utilisation rates of major Chinese firms producing
plug-in hybrids and pure EVs ranged from 33% to 111% in 2023
based on a double-shift schedule, with BYD  1211.HK  running at
95% and Li Auto  2015.HK  at 106% by adding additional shifts,
according to data from China Merchants Bank International.
    Nio logged the lowest rate of 33%, the data showed.
    ($1 = 7.2456 Chinese yuan)

 (Reporting by Zhang Yan, Zhuzhu Cui and Kevin Krolicki; Editing
by Miyoung Kim and Himani Sarkar)
 ((Zoey.Zhang@thomsonreuters.com;))